Safe and Sound

State Bank of Colon

Colon, NE
3
Star Rating
State Bank of Colon is a Colon, NE-based, FDIC-insured bank founded in 1899. As of December 31, 2017, the bank held equity of $1.6 million on $18.1 million in assets.

Thanks to the work of 5 full-time employees, the bank currently holds loans and leases worth $12.1 million, including $4.4 million worth of real estate loans. U.S. bank customers currently have $12.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, State Bank of Colon exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three key criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial resilience, capital is key. It acts as a bulwark against losses and as protection for depositors when a bank is experiencing economic instability. When looking at safety and soundness, more capital is preferred.

State Bank of Colon received a score of 10 out of a possible 30 points on our test to measure the adequacy of a bank's capital, coming in below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. State Bank of Colon's Tier 1 capital ratio was 12.26 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, State Bank of Colon held equity amounting to 9.09 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of troubled assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with lots of these kinds of assets could eventually be required to use capital to absorb losses, decreasing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, diminishing earnings and increasing the chances of a failure in the future.

State Bank of Colon scored 40 out of a possible 40 points on Bankrate's asset quality test, beating out the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.22 percent of State Bank of Colon's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the reserve's size to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. State Bank of Colon's loan loss allowance was 1,444.44 percent of its total noncurrent loans, above the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings can be retained by the bank, boosting its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, take away from a bank's ability to do those things.

State Bank of Colon fell behind the national average on Bankrate's test of earnings, achieving a score of 0 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for State Bank of Colon was -0.12 percent, below the national average of 8.10 percent.

The bank reported net income of $-2,000 on total equity of $1.6 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of -0.01 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.